Consultation on the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs)

Transcription

1 GdW Statement Consultation on the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs) Statement to the European Commission March 2010

2 Published by: GdW Bundesverband deutscher Wohnungsund Immobilienunternehmen e.v. Mecklenburgische Straße 57 D Berlin Tel.: +49 (0) Fax: +49 (0) Brussels Office of GdW 47-51, rue du Luxembourg 1050 Brussels BELGIUM Tel.: Fax: mail@gdw.de Internet: GdW 2010

3 Consultation on the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SME) Statement to the European Commission

4 Table of contents Page 1 Preamble 1 2 Fundamental assessment of IFRS for SMEs 2 3 The questions in detail 3 Annex Organisation and EU Registration 7

5 1 Preamble GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen e. V. (the Federal Association of German Housing and Real Estate Enterprises) is the largest umbrella organisation for the real estate industry in Germany. The almost 3,000 member companies that are organised in GdW and its regional associations manage a rental housing portfolio of roughly 6 million apartments in Germany. The member companies of GdW involve some 1,000 public limited companies and approx. 2,000 cooperatives. At the same time, GdW is the head association and audit association in the context of the German Cooperatives Act. In this respect, GdW coordinates and represents the interests of those cooperative audit associations that are members in GdW. In this statement, we wish to address the concerns of medium-sized, non-capital-market-oriented companies and, in particular, the cooperatives, as regards International Financial Reporting Standards. 1

6 2 Fundamental assessment of IFRS for SMEs From the point of view of GdW, the IFRS for SMEs leads to an increased burden on medium-sized, non-capital-market-oriented companies on account of its complexity. The IFRS for SMEs primarily serves an informational purpose. It does not form a suitable starting basis for calculating taxes or distributions from companies. These functions would have to be replaced with additional accounting methods. The added burden is unreasonable from the standpoint of the target group of the IFRS for SMEs. As a matter of principle, we consider creditor protection, the principle of prudence and the preservation of capital to be the primary purpose of accounting in small and medium-sized companies. We do not consider the IFRS for SMEs to cater to this purpose. The IFRS for SMEs is also not generally a suitable accounting basis for small and medium-sized companies on account of its complexity. National regulations are better suited in this respect. However, the IFRS for SMEs does provide easement to those Member States that apply the full IFRS for small and medium-sized companies. Therefore, in our opinion, a review process should be conducted to ascertain whether the IFRS for SMEs can be reconciled with the European Accounting Directives and, if so, to what extent. If this should prove to be the case, no further decisions or administrative acts at European level would be necessary, as the Member States could then approve them. We plead for greater consideration, in particular, of the special features of accounting in medium-sized, non-capital-market-oriented companies. It is our opinion that the IFRS for SMEs is not suitable in this respect. 2

7 3 The questions in detail Question 1: Do you think the IFRS for SMEs is suitable for widespread use within Europe? Please comment, indicating whether there are any type(s) or size(s) of company that would benefit from adopting the Standard: We see no advantages for any of the groups of companies specified (small, medium, large). Question 2: If you are a preparer of company accounts can you indicate any costs (both one-off and recurring) or benefits, and any other effects of adopting the IFRS for SMEs? We see an increase in the costs for the companies instead on account of the complexity of the IFRS for SMEs. In particular, do you think increased international comparability of accounts prepared under the IFRS for SMEs will benefit your business? We see no additional benefits, as the IFRS for SMEs contains options that impede the comparability of annual financial statements. Question 3: If you are a user of accounts (for example a bank) do you think the IFRS for SMEs will provide more useful information than national GAAP accounts? Experiences show that, especially for banks, creditor protection, the principle of prudence and the preservation of capital are of primary importance in the assessment of information in annual financial statements. However, these functions of the annual financial statement play no role in the IFRS for SMEs. 3

8 The users of annual financial statements generally cast substantial doubt on the supposed increased additional benefits resulting from a greater information content of an annual financial statement due to accounting at fair value and the presentation of deferred taxes. Question 4: Does increased international comparability of accounts prepared under the IFRS for SMEs benefit users? We see no benefits from increased comparability of accounts in the field of small and medium-sized entities (SMEs), as the IFRS for SMEs also contains options that impede the comparability of accounts. Question 5: Do you think adoption of the IFRS for SMEs should be provided for within the EU accounting legal framework? We reject adoption of the IFRS for SMEs in the EU accounting legal framework as a matter of principle on the basis of independent legal or administrative acts. In our opinion, compatibility with the new EU Accounting Directives should be reviewed and established. If this should prove to be the case, no further decisions or administrative acts at European level would be necessary. Question 6: If yes, should such an option be limited to a Member State option (i.e. that each Member States would have a possibility but no obligation to accept IFRS for SME)? YES. In the event of adoption of the IFRS for SMEs in the EU accounting legal framework, it would be imperative for the Member States to be granted an option, as accounting regulations exist in the individual Member States, e.g. in Germany, that correspond to the requirements of the 4th and 7th EU 4

9 Directives and better cater to the requirements of small and medium-sized companies. Question 7: Do you have other views on the possible adoption of the IFRS for SMEs within the EU accounting framework? It should be elaborated within the framework of a review process whether reconciliation of the IFRS for SMEs with the corresponding EU Accounting Directives can be established. Question 8: Is there a case for giving companies, at EU level, an option to adopt the IFRS for SMEs? Question 9: What should be done, in your view, where there is incompatibility between the Directives and the IFRS for SMEs? In such a case, it should be reviewed whether the EU would be better advised to develop its own standards. Question 10: In the light of the publication of the IFRS for SMEs, do you see a need for "rules-based" Accounting Directives in the future? Question 11: Are there any elements of the IFRS for SMEs that should be incorporated within revised Directives? We do not consider that the incorporation of individual elements of the IFRS for SMEs in the revised Directives would facilitate achieving the objective, as no resultant improvement 5

10 in the expressiveness of the annual financial statements of small and medium-sized companies can be anticipated. Question 12: Do you have any other observations or comments on the IFRS for SMEs or the project to overhaul the Accounting Directives? In the event of an overhaul of the Accounting Directives, it should be ensured that these take into account the requirements of small and medium-sized companies. The IFRS for SMEs does not provide a suitable basis to this end due to its rules-based approach. 6

11 Annex Organisation and EU Registration 7

12 Please provide the following details together with your response: You are: Preparer: company subsidiary of foreign company X organisation of companies User: X bank/credit provider X analyst other organisation of stakeholders X private person X investor association organisation Public authority: X audit/market regulator X Ministry / government other Audit profession: sole practitioner / audit firm not member of a network / firm member of a network that is not a member of the IFAC Forum of Firms audit firm within a network that is a member of the IFAC Forum of Firms X organisation of accountants and auditors Other: (please specify) Name of your organisation / company: GdW Bundesverband deutscher Wohnungsund Immobilienunternehmen e.v. Country where your organisation / company is located: Contact details incl. address: mail@gdw.de Germany Mecklenburgische Straße 57, D Berlin, Short description of the general activity of your organisation / company: see point 1 "General Remarks" Is your organisation registered in the Interest Representative Register? X Yes No If yes, please specify the address of your organisation and the Register ID number in the Interest Representative Register: Publication: Do you object to publication of the personal data on the grounds that such publication would harm your legitimate interests? X I object 8

13 GdW Bundesverband deutscher Wohnungsund Immobilienunternehmen e.v. Mecklenburgische Str. 57 D Berlin Tel.: +49 (0) Fax: +49 (0) Brussels Office of GdW 47-51, Rue du Luxembourg 1050 Brussels BELGIUM Tel.: Fax: mail@gdw.de Internet: